Dabhol gives MSEB Rs 26,000 cr notice

Board retaliates, slaps contempt of court notice.

The Maharashtra State Electricity Board (MSEB) has slapped a notice for contempt of court on Dabhol Power Company (DPC) after it received a claim of Rs 26,000 crore from the latter on May 21, 2004.

The Supreme Court had earlier issued an injunction against starting of any arbitration proceedings by DPC. The MSEB's contempt notice has to be seen in this context.

Sources close to both the MSEB and DPC confirmed this, pointing out that the board had retaliated by slapping the notice around a fortnight back.

DPC has claimed Rs 26,000 crore mainly for future losses after the MSEB rescinded the power purchase agreement (PPA) with it on May 21, 2001. DPC's claims would have lapsed had it not gone ahead and served its notice before May 21, 2004.

This was a legal requirement if DPC was to press ahead with the claims before the end of a three-year deadline after the revocation of the PPA.

"The idea was not to let the claims lapse. That is the reason for the notice being served under British law," sources close to DPC said.

Sources familiar with the development told Business Standard: "The notice issued by DPC also notes that they are aware of the injunction issued by the Supreme Court of India against the starting of any arbitration proceedings. The notice further notes that it has been issued so that its claim does not get time barred." Further, the notice also sought to stay the operationality of the claim by "mutual consensus", sources said.

The latest twist in the Dabhol saga comes after General Electric and Bechtel gained control of DPC with a combined stake of around 85 per cent after they bought the 65 per cent stake in DPC of the bankrupt US major Enron Corp's stake. Their shares in DPC are, however, pledged with the domestic financial institutions.

The Dabhol power plant has been idle after MSEB rescinded the PPA following a payments dispute with DPC.

Attempts by the Maharashtra government, the Union government and the domestic and foreign lenders to find a lasting solution have so far failed.

However, in their latest round of discussions the lenders have narrowed down their differences on the price at which offshore lenders' debt will be bought by the domestic lenders. This is expected to remove one of the major hurdles in finding a solution.

Tit for tat: The saga continues

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• Dabhol Power Company (DPC) says it is aware of the Supreme Court injunction against starting new proceedings

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• But DPC says it was forced into fresh proceedings so that its claims do not get time barred

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• The DPC claim notes "operationality can be stayed by mutual consensus", says it is open to negotiations

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• DPC has claimed Rs 26,000 crore for future losses after the Maharashtra State Electricity Board rescinded the power purchase agreement with it on May 21, 2001